U.S. services sector contracting at record paceMarketwatch
By Greg Robb, MarketWatch
Last update: 11:05 a.m. EST Dec. 3, 2008
WASHINGTON (MarketWatch) - Non-manufacturing companies in the United States were contracting in November at the fastest pace on record, according to a survey of companies released Wednesday by the Institute for Supply Management.
The ISM nonmanufacturing index fell to 37.3% from 44.4% in October. It's the lowest level since the survey began in 1997.
Readings below 50% in the diffusion index indicate more firms are contracting than expanding. In November, only one industry - health care - reported growth.
On Monday, the group reported that the ISM manufacturing index also plunged in November to 36.2%, the lowest level since May 1982. Economists said this confirmed that the recession may be protracted. The Fed is wrestling with how to respond now that its short-term interest rate tool is so close to zero, according to James Bullard, the president of the St. Louis Fed. See full story.
Comments from purchasing managers were mostly concerned with how long the recession would last, the ISM said.
Europe's services sector also slowed sharply in November, with closely-tracked purchasing managers indexes for the euro zone and Great Britain dropping to record lows. They also underscored expectations the European Central Bank and the Bank of England will move to aggressively cut official interest rates Thursday, economists said. See full story.
Economists surveyed by MarketWatch expected the ISM index to fall to 42.7%. See Economic Calendar.
All the major sub-indexes fell to record lows in the month.
The new-orders index fell in November to 35.4% from 44.0% in October.
Business activity index fell to 33.0% from 44.2% in October.
The prices-paid index plunged to 36.6% in November from 53.4% in the previous month.
Worries about Nov. unemployment report
The survey was released two days before the key November employment report.
Economists expect 350,000 job losses in the month. . A decrease of 350,000 would be the largest drop since May 1980, when more than 400,000 jobs were shed. Read Economic Preview.
The ISM employment index fell to 31.3% from 41.5% in October. This raises the risk of a worse drop in employment than economists expect.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the plunge in the ISM employment index is consistent with 500,000 lost jobs in November.
Other reports released Wednesday showed a weakening labor market. According to the ADP national employment index, the U.S. private sector shed 250,000 jobs in November, the biggest job loss in seven years. See full story.
Led by massive cuts at Citigroup and other banks, major U.S. corporations announced 181,671 layoffs in November, the highest total in nearly seven years, according to a separate survey conducted by outplacement firm Challenger Gray & Christmas and released on Wednesday. See full story.
Employees who have kept their jobs are being forced to do more. The Labor Department also reported that the productivity of U.S. workers was slightly stronger in the third quarter than previously reported. Productivity in nonfarm businesses increased at an annual rate of 1.3% in the quarter, not 1.1%. End of Story
Greg Robb is a senior reporter for MarketWatch in Washington.